Nigerian Airlines in Crisis as Fuel Shortage Worsens

Nigerian Airlines in Crisis as Fuel Shortage Worsens

2016 05 23

2016 05 23

A shortage of jet fuel in Nigeria has intensified this week, forcing several of the country’s airlines to delay and cancel flights. According to a report by S&P Global Platts, a scarcity of currency exchange has prevented marketers from shipping jet fuel to airports such as Muhammad Murtala Airport in Lagos, forcing several of the country’s airlines to cancel and delay many more flights than they normally do.

The lack of foreign exchange relates to the government's refusal to devalue the naira, despite the currency’s recent downward spiral. Meanwhile, the Central Bank of Nigeria has restricted access to foreign currency and banned a number of imported goods, making it difficult to import crucial refined oil products. The shortages continue even while a number of tankers wait outside Lagos for lack of access to foreign exchange to fuel marketers.

Separately, the government has increased the price of jet fuel to 140 nairas ($0.70) per liter from 115 nairas per liter, increasing operating costs among local carriers, according to the Platts report.

The country’s minister of state for petroleum, Emmanuel Kachikwu, recently reported that a nearly 40 percent drop in oil production in Nigeria has severely hurt the government's revenue, making it impossible to continue to fund the subsidy on imported jet fuel and gasoline. He added that oil production has declined to 1.4 million barrels a day from some 2.2 million barrels a day at the beginning of the year due to a wave of attacks on production facilities in the Niger Delta.

Low use rates of the country’s four state-run refineries have exacerbated the problem, and decreasing oil revenues have left infrastructure in desperate disrepair. Despite its rich oil reserves, Nigeria must import most of its jet fuel.

While industry demand typically totals around 25 million liters per month, fuel marketers have barely managed to ship 5 million liters over the past two months.